Parallel Addictions?
The recent volatility of oil prices has inevitably led to a broader discussion about our dependence on oil and the need to develop new sources of clean energy. Try as we will to avoid the topic, the facts continue to mount. Gone are the days when our insatiable appetite for oil was satisfied by the seemingly endless supply of light sweet crude gushing freely from the oil fields of Texas, and Happy Motoring was the mantra for a generation that believed the future had arrived (how else to explain the introduction of the AMC Pacer?).
Over the past 35 years the landscape has changed dramatically. Increased demand from developing giants like China and India combined with our love of SUVs has created oil shortages not created by oil producers’ desire to curtail supply, as much as it has by their inability to keep pace with an ever increasing global demand. Hence, it’s not surprising that when pundits look into a crystal ball and identify the one single point of failure in a system ensuring our long term stability and security, all points lead to our reliance or addiction to oil (I’ll come back to that).
Amidst the uncertainty, there are still those who doggedly cling to the belief that the auto industry is simply reacting to market demands; the “give the people what they want” mentality. In a particularly animated conversation in our lunchroom today, I debated this point with a colleague who saw no fault in the collective strategic decision making of Detroit. “Look,” he began, “some people like big cars and SUVs; Detroit is just giving people what they want.”
I quickly responded “Do you know how hard the auto industry in Washington has been lobbying lawmakers not to increase taxes on oil, and this in turn continues to fuel demand for big dumb cars?”
“Nor should they” my friend retorted, “that would impose artificial variables in the free market system.” At that moment I caught myself sizing up his graying temples, thinning hair, and expanding girth and realized that like me, he probably came of age when Ronald Reagan became President with his prescription that society’s ills would be cured when government stepped aside and let the free market run the show. Indeed, he could have been making a speech from an era when mousse transformed limp hair into a form that seemed capable of taking flight at any moment.
In the summer of 1991 I was a student at the University of Waterloo studying economics, when a wise professor, Wayne Thirsk began a lecture by asking the class if we knew what portion of the price we paid for gas went toward taxes. Frankly, I don’t remember whether that was 20% or 60%, but the entire class was perplexed by the notion taxes constituted such a large proportion of what we paid; apparently, the forces of communism hadn’t died when the Berlin Wall fell two years before, they only crossed the Atlantic and swooped in under radar. Dr. Thirsk rationalized this explaining the tax could be used to encourage drivers to curtail their driving habits, while using the revenues to fund the development of alternative energies.
During the same semester I took a political science elective and our professor gave us an open-ended assignment requiring we choose a contemporary hot-button issue and analyze it from a perspective where personal liberty conflicted with public good. One of the biggest issues of the day was the Ontario Government’s attempt to launch a sustainable program that would curtail smoking; two years prior it had enacted its first significant anti-smoking legislation banning smoking indoors and now the cost for a pack of cigarettes jumped from about $2.50 to $7.50; the province rationalized the additional tax revenue was a user fee for smokers (Ontario, like other jurisdictions in Canada has a publicly-funded health care system, so from a financial point of view it made sense to target smokers who imposed a disproportionate demand on health care resources).
At the time, this seemed inconceivable. I grew up when smoking was socially acceptable, even sophisticated, but once the government determined to rid Ontarians of this addiction, it started a program that would never look back. Today, these efforts have resulted in significantly reducing the number of smokers, and marginalizing those who continue to light up. Smoking has in fact become a curious vestige from another era. It is interesting then to note that the pitch made by those advocating the development of alternate energies always includes the standard catch phrase: “we need to break our addiction to oil.” Sound familiar?
I used this as my analogy as I plead my case in the lunchroom and said that if all of our actions were calibrated to “give the people what they want”, then most of us would still be dragging to our heart’s content (a rapidly weakening one) on an endless flow of cigarettes, our kids could pick up a pack at the snap of a finger, and Joe Camel would likely have a series of instructional smoking videos out on YouTube. Oh, and a whole lot more of us would be dead. Sometimes, the government has to step in and create artificial mechanisms disrupting the flow of the free market and curtailing our individual liberties for the sake of the public good.
Quite the program, and not too dissimilar to the types of plans energy experts envision for steering us away from oil and adopting alternate energy sources. The similarities between our love of oil and tobacco are noteworthy. Their widespread popularity took off around the same time, until people started realizing these were actually unhealthy addictions. In breaking our habits, both programs begin by imposing taxes to curtail a certain behaviour, and follow up with steps intended to wean us off our powerful addiction. With oil, it is hoped that one day our past dependency will also look like another curious relic from a by-gone era.
Over the past 35 years the landscape has changed dramatically. Increased demand from developing giants like China and India combined with our love of SUVs has created oil shortages not created by oil producers’ desire to curtail supply, as much as it has by their inability to keep pace with an ever increasing global demand. Hence, it’s not surprising that when pundits look into a crystal ball and identify the one single point of failure in a system ensuring our long term stability and security, all points lead to our reliance or addiction to oil (I’ll come back to that).
Amidst the uncertainty, there are still those who doggedly cling to the belief that the auto industry is simply reacting to market demands; the “give the people what they want” mentality. In a particularly animated conversation in our lunchroom today, I debated this point with a colleague who saw no fault in the collective strategic decision making of Detroit. “Look,” he began, “some people like big cars and SUVs; Detroit is just giving people what they want.”
I quickly responded “Do you know how hard the auto industry in Washington has been lobbying lawmakers not to increase taxes on oil, and this in turn continues to fuel demand for big dumb cars?”
“Nor should they” my friend retorted, “that would impose artificial variables in the free market system.” At that moment I caught myself sizing up his graying temples, thinning hair, and expanding girth and realized that like me, he probably came of age when Ronald Reagan became President with his prescription that society’s ills would be cured when government stepped aside and let the free market run the show. Indeed, he could have been making a speech from an era when mousse transformed limp hair into a form that seemed capable of taking flight at any moment.
In the summer of 1991 I was a student at the University of Waterloo studying economics, when a wise professor, Wayne Thirsk began a lecture by asking the class if we knew what portion of the price we paid for gas went toward taxes. Frankly, I don’t remember whether that was 20% or 60%, but the entire class was perplexed by the notion taxes constituted such a large proportion of what we paid; apparently, the forces of communism hadn’t died when the Berlin Wall fell two years before, they only crossed the Atlantic and swooped in under radar. Dr. Thirsk rationalized this explaining the tax could be used to encourage drivers to curtail their driving habits, while using the revenues to fund the development of alternative energies.
During the same semester I took a political science elective and our professor gave us an open-ended assignment requiring we choose a contemporary hot-button issue and analyze it from a perspective where personal liberty conflicted with public good. One of the biggest issues of the day was the Ontario Government’s attempt to launch a sustainable program that would curtail smoking; two years prior it had enacted its first significant anti-smoking legislation banning smoking indoors and now the cost for a pack of cigarettes jumped from about $2.50 to $7.50; the province rationalized the additional tax revenue was a user fee for smokers (Ontario, like other jurisdictions in Canada has a publicly-funded health care system, so from a financial point of view it made sense to target smokers who imposed a disproportionate demand on health care resources).
At the time, this seemed inconceivable. I grew up when smoking was socially acceptable, even sophisticated, but once the government determined to rid Ontarians of this addiction, it started a program that would never look back. Today, these efforts have resulted in significantly reducing the number of smokers, and marginalizing those who continue to light up. Smoking has in fact become a curious vestige from another era. It is interesting then to note that the pitch made by those advocating the development of alternate energies always includes the standard catch phrase: “we need to break our addiction to oil.” Sound familiar?
I used this as my analogy as I plead my case in the lunchroom and said that if all of our actions were calibrated to “give the people what they want”, then most of us would still be dragging to our heart’s content (a rapidly weakening one) on an endless flow of cigarettes, our kids could pick up a pack at the snap of a finger, and Joe Camel would likely have a series of instructional smoking videos out on YouTube. Oh, and a whole lot more of us would be dead. Sometimes, the government has to step in and create artificial mechanisms disrupting the flow of the free market and curtailing our individual liberties for the sake of the public good.
Quite the program, and not too dissimilar to the types of plans energy experts envision for steering us away from oil and adopting alternate energy sources. The similarities between our love of oil and tobacco are noteworthy. Their widespread popularity took off around the same time, until people started realizing these were actually unhealthy addictions. In breaking our habits, both programs begin by imposing taxes to curtail a certain behaviour, and follow up with steps intended to wean us off our powerful addiction. With oil, it is hoped that one day our past dependency will also look like another curious relic from a by-gone era.
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